Nearly everyone in the US knows about payday loans now. They’re not hard to get hold of and are great to use for a quick cash injection if you find yourself short on money half-way through the month. Many people will know somebody who has taken out one of these loans at some point, or will have at least considered getting one. Whilst states currently set their own rules and regulations regarding payday loans, the amount that can be borrowed can legally be anything between $100 and $1000, and can be provided by lenders such as payday loan stores (which often also operate online), check cashing stores, pawn shops, toll-free telephone numbers, and, occasionally, some rent-to-buy companies. The average length of a payday loan in the US is fourteen days, and they’ll usually have interest rates of 400% APR (annual percentage rate), or higher.
To take out one of these loans, you won’t need much; just a working, open bank account, identification and a regular cash flow or source of income. Credit checks are rarely carried out, and unlike banks, payday loan lenders don’t check that the borrower can repay the loan by the end of the loan term.
Currently, only thirty-two US states allow payday loans to be borrowed, and many of the states that do allow them have set limits on the amounts that can be loaned and the interest rates and fees that can be added on, with the aim of protecting the consumer.
On average, payday loan borrowers take out between 8 and thirteen loans per year, with the same lender, and it’s often to pay off the previous loans they’ve taken out. It’s because of this that a high number of borrowers of payday loans have low credit scores and face lots of penalty fees from their banks. This has led to the shocking statistic that payday loan borrowers are almost twice as likely to be declared bankrupt than those who were too financially unstable to get the loan in the first place. Therefore, it’s important to make sure you know what the laws are regarding payday loans in your state.
In the state of Maryland, payday loans are currently prohibited by the Consumer Loan Act. Although this makes payday loans illegal, it still allows for the lending and borrowing of small loans, but has set a cap on how much interest can be charged on the loan in any given month or year. Maryland’s small loan rate cap currently stands at 2.75% per month or 33% per year.
The regulatory body for small loans and payday loans in Maryland is the Maryland Commissioner of Financial Regulation, and the main contact for the regulatory body is Michael Jackson, Director of Regulatory Policy. If you need to get in touch to ask questions, complain or get help and advice, call the division on (410) 230-6100 or alternatively you can write to 500 North Calvert Street, Suite 402, Baltimore, MD 21202.